The Hindu Business Line : ‘Vibrant corporate bond market must for growth’

Deepening markets: Mr P.Chidambaram, Finance Minister, and Mr Manish Sabharwal, Vice-Chairman, ICAP India Pvt Ltd, at a press conference in Mumbai on Friday. –

Our Bureau

Mumbai, March 28 Large corporates going in for delisting from the stock exchanges is a matter of concern, said the Finance Minister, Mr P. Chidambaram, here on Friday.

The Minister said that delisting takes companies out of public scrutiny. “I am a little concerned that some large companies want to delist. A good company must remain listed, must meet all corporate governance standards and should enhance shareholders’ value,” Mr Chidambaram said speaking at the launch of ICAP’s electronic corporate bond trading system.

Key role

Emphasising the need for a vibrant corporate bond market, Mr Chidambram said corporate bonds played an important role in the growth of an economy.

“We need $500 billion until 2012 for investment in infrastructure. The absence of a vibrant bond market is a handicap,” he said. Government bonds currently dominate the domestic bond market. They account for two-thirds of the total outstanding debt and 97 per cent of secondary trade, Mr Chidambaram said.

On increasing FII investment in the corporate bond market, the Finance Minister said that although the Reserve Bank of India was necessarily cautious about expanding total debt, there was scope to further increase the FII limit in the bond market as there was a need for funds. “The decision will have to be taken by the regulator,” he said. Currently, the FII limit in corporate debt stands at $1.5 billion.

Stamp duty

The Finance Minister said that there was a need to develop a seamless pan-Indian corporate bond market but this was not possible now because of the differing rates of stamp duty charged by the State governments.

Mr Chidambaram said that he has asked the empowered committed of finance ministers to consider uniform stamp duty rates on corporate bonds as it would only enhance the revenues of the States. The Finance Minister also said that the introduction of repos in corporate bonds would improve liquidity.

“I hope that repo in corporate bonds will be introduced as soon as possible. The move will improve liquidity in the market,” Mr Chidambaram said. Repos would allow investors to recycle illiquid corporate bonds and then borrow, which in turn would improve liquidity.

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